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LEGAL STUDIES RESEARCH PAPER SERIES

RESEARCH PAPER 2015

January, 2015

DISTINGUISHING BETWEEN SIMPLE AND EXPRESS TRUSTS.

EMMANUEL, MICHAEL MATTHEW.ESQ

LLB V [FACULTY OF LAW, UNIVERSITY OF UYO, UYO]

This paper can be downloaded without charge from

http://imeumanahchambers.wordpress.com/e-resources A PUBLICATION OF IME UMANAH CHAMBERS, UNIVERSITY OF UYO, UYO.

DISTINGUISHING BETWEEN SIMPLE AND EXPRESS TRUSTS.

THE NATURE OF TRUST

Like all legal terms, to attempt a definition of a trust is fraught with difficulty, as there is no generally acceptable definition of the concept of

Trust. The definition given by Keeton has however been described as adequate, which described trust in the following manner:

‘‘All that can be said of a trust therefore, is that it is the relationship which

arises whenever a person called the is compelled in equity to hold

property, whether real or personal, and whether by legal or equitable title,

for the benefit of some persons (of whom he may be one and who are

termed as ces tui que trust) or for some object permitted by law, in such a

way that the real benefit of the property accrues, not to the trustee, but to

the beneficiaries or other objects of the trust ”1

1 See Keeton, The Law of Trusts, Eight Edition, p. 3 cited in Jegede, M.I. (1999). Law of Trusts, Bankruptcy and Administration of Estate. Lagos: MIJ Professional Publishers Limited, p. 11. A PUBLICATION OF IME UMANAH CHAMBERS, UNIVERSITY OF UYO, UYO.

NATURE OF SIMPLE TRUSTS

A simple trust (sometimes referred to as a bare, naked, dry or mandatory trust) is a basic trust in which the has the absolute right to the capital and assets within the trust, as well as the income generated from these assets and may call for both to be remitted into his own name. simple trusts are widely used by parents and grandparents to transfer assets to their children or grandchildren. Trust assets are held in the name of a trustee, who has the responsibility of managing the trust assets in a prudent manner so as to generate maximum benefit for the beneficiaries. The trustee has no control over these assets and has no say or discretion in directing the trust's income or capital. The simple trust is named so because it deals solely on the grantor’s (the person who creates or establishes the trust) current income and how it is distributed when the grantor passes away. A simple trust does not involve any charitable gifts nor does it encompass assets that will continue to earn income after the grantor has died.

A PUBLICATION OF IME UMANAH CHAMBERS, UNIVERSITY OF UYO, UYO.

NATURE OF EXPRESS TRUSTS

An is when a creates a trust declaring herself or himself

as a trustee of their own property, or transferring said property to another

trustee. Although, an express trust is created pursuant to the intention of

the settlor, the courts can also make an inference to the intention to create

an express trust if it is satisfied that the parties want to create a equitable

interest in a third party, and the trust relationship is the appropriate means

of creating that intention. There are generally two classifications of trusts:

express and non-express. The common forms of express trust include:

Private trusts, public trusts, fixed trusts, discretionary trusts, executed trusts,

executory trusts and simple trusts.

THE DISTINCTIONS BETWEEN SIMPLE AND EXPRESS TRUSTS

Despite the numerous similarities which both simple and express trusts

share in common as both forms of trust, there exists some major differences

and they include:

1.) Under simple trust the interest of a trustee under a simple or is

limited to only holding legal title to the trust property, There is no further

duty of performance – except to transfer the property on demand to the A PUBLICATION OF IME UMANAH CHAMBERS, UNIVERSITY OF UYO, UYO. beneficiaries, or as directed by them. As was stated in De Mond v. R.2, by the learned Justice Lamarre of Canada's Tax Court:

"The distinguishing characteristic of the bare trust is that the trustee has no independent powers, discretions or responsibilities. His only responsibility is to carry out the instructions of his principals --- the beneficiaries. If he does not have to accept instructions, if he has any significant independent powers or responsibilities, he is not a bare trustee."

Also, in Ironside v Smith,3 Justice Fruman of the Alberta Court of Appeal stated that:

"….A bare trustee has no further duty to perform except to convey the property to the beneficiary on demand and, so long as he holds it, to exercise reasonable care over the property, by maintaining or investing it."

Unlike in a simple trust, where the trustee, apart from the primary duty of fair distribution of stated properties to the beneficiaries, has no other duty, in an express trust, the trustee has many other enormous duties which at times may even be exercised discretionarily depending on the form or nature of express trusts involved.

2 29 ETR 2d 226 (1999) 3 1998 ABCA 366 A PUBLICATION OF IME UMANAH CHAMBERS, UNIVERSITY OF UYO, UYO.

2.) Again, under simple trust , a trust can only be said to exist whenever title to

property is vested in one person to be held for the benefit of another, what

this means is that under simple trust the trust property cannot be held by

the settlor or maker of the trust himself for the benefit of the trust

but must always be held by a trustee who should not be the settlor.

Unlike in an express trust where from the general definition of the

concept, the trustee can either be the settlor himself or any other party that

he may deem fit to appoint as such.

3.) Being that a simple trust does not encompass assets that will continue to

earn income after the grantor has died. Hence, certain types of assets or

property which cannot be passively held in trust such as shares, stocks, and

copyrights etc, cannot be held by a trustee under a simple trust.

On the other hand, a trustee under an express trust can hold any and

all sort of assets, reason being that the trustee under an express trust unlike

that of a simple trust does not hold the properties in trust passively and in

most instances is not restricted to certain types of asset.

4.) Another significant difference between both concepts (simple and express

trust) is that under a simple trust the trustee does not owe a legal duty of A PUBLICATION OF IME UMANAH CHAMBERS, UNIVERSITY OF UYO, UYO.

loyalty and faithfulness towards another. As stated by Justice Fruman of the

Alberta Court of Appeal in Ironside v Smith (supra), thus:

"An individual may hold property on behalf of another as bare trustee

without taking on all the onerous trappings of a fiduciary...’’

Whereas, under an express trust, the trustee owes a fiduciary

duty/relationship to all the beneficiaries of such trust.

6.) A simple trust does not involve any charitable gifts neither does it

encompass assets that will continue to earn income after the grantor has

died.

An express trust, on the other hand involves charitable gifts or what is

known as public trusts, which is the trust for the benefit of the public and

can be enforceable by the Attorney General who is the custodian all public

rights.